The demand and supply schedules for a Micro textbook are: Price (dollars) Quanti
ID: 1250338 • Letter: T
Question
The demand and supply schedules for a Micro textbook are:
Price (dollars) Quantity demanded Quantity supplied
(thousands) (thousands)
20 300 50
40 250 100
60 200 150
80 150 200
100 100 250
a. Draw the graph of the market, label the axes and curves, and mark the equilibrium price and quantity.
b. Suppose the price of the textbook is $40. Describe the situation in the textbook market and explain how the price adjusts.
c. Suppose the price of the textbook is $80. Describe the situation in the textbook market and explain how the price adjusts.
Explanation / Answer
a. First Find the Slopes of the Supply and Demand Schedules y2 – y1 / x2 - x1 40- 20 / 250 – 300 = -2/5 40 – 20 / 100 – 50 = 2/5 Next Solve for Y intercepts y=mx + b 20 = 2/5 (50) + b b = 0 20 = -2/5 (300) + b b = 140 Next Set the Equations Equal and find Quantity -2/5x + 140 = 2/5 x + 0 175 = x Then Plug in 175 to either the supply or demand equation to find price y = 2/5 (175) + 0 y = 70 b. If the price is below equlibrium price there will be more people willing to buy textbooks than sell them and the market will correct c. If the price is above equlibrium price then there will be more people willing to supply them than sell them and the market will correct.
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